Liberal ECB norms, higher cap for FIIs in debt on cards
The finance ministry is actively examining a proposal to further relax rules for overseas borrowings in the backdrop of rupee depreciation and tight liquidity situation in the country.
By ET Bureau |
NEW DELHI: The external commercial borrowing (ECB) norms could see another round of relaxation. The finance ministry is actively examining a proposal to further relax rules for overseas borrowings in the backdrop of rupee depreciation and tight liquidity situation in the country.
���The ministry has held consultations with the RBI to explore the possibility of easing the restrictions on foreign borrowings placed an year ago to contain dollar inflows,��� an official in the finance ministry said. Besides, the investment limit for foreign institutional investors in debt, both corporate and government bonds, could also go up.
In August 2007, the government had capped rupee expenditure at $20 million for tapping the ECB route. And even this needed prior RBI clearance.
While the government has been easing ECB norms, particularly for the infrastructure sector, the restrictions imposed in 2007 have not been completely done away with. Domestic companies that do not operate in infrastructure sector can now borrow only up to $50 million for rupee expenditure.
Although, infrastructure companies have been allowed to borrow up to $500 million, they need prior RBI approval before they can bring those funds into the country.
In fact, the definition of infrastructure was expanded on Tuesday to include refining, mining and exploration sector. Sources said the idea is to go to the pre-August 2007 level. Moreover, there is a concerted effort to inject liquidity in the system.
Meanwhile, finance minister P Chidambaram assuaged market sentiments and assured the government would inject more liquidity, if needed, to fire up economic activity. ���Everybody in the world is doing it. We are not affected to that extent.
To the extent liquidity is needed, we will provide,��� he said, adding ���the (RBI ) governor is already on record, if necessary he will take further measures to infuse liquidity.���
���The ministry has held consultations with the RBI to explore the possibility of easing the restrictions on foreign borrowings placed an year ago to contain dollar inflows,��� an official in the finance ministry said. Besides, the investment limit for foreign institutional investors in debt, both corporate and government bonds, could also go up.
In August 2007, the government had capped rupee expenditure at $20 million for tapping the ECB route. And even this needed prior RBI clearance.
While the government has been easing ECB norms, particularly for the infrastructure sector, the restrictions imposed in 2007 have not been completely done away with. Domestic companies that do not operate in infrastructure sector can now borrow only up to $50 million for rupee expenditure.
Although, infrastructure companies have been allowed to borrow up to $500 million, they need prior RBI approval before they can bring those funds into the country.
In fact, the definition of infrastructure was expanded on Tuesday to include refining, mining and exploration sector. Sources said the idea is to go to the pre-August 2007 level. Moreover, there is a concerted effort to inject liquidity in the system.
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Meanwhile, finance minister P Chidambaram assuaged market sentiments and assured the government would inject more liquidity, if needed, to fire up economic activity. ���Everybody in the world is doing it. We are not affected to that extent.
To the extent liquidity is needed, we will provide,��� he said, adding ���the (RBI ) governor is already on record, if necessary he will take further measures to infuse liquidity.���
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